India to Further Relax FDI Norms for Aviation and Insurance Sectors

According to local media reports, anunidentified/unnamed source revealed that India is considering further opening up its aviation and insurance sectors to foreign investors, in an effort to get economic growth back on track.

As per the source, the Ministry of Finance (MoF) has suggested allowing foreign airlines to own Indian carriers and increase the limit on foreign direct investment (FDI) in insurance and pension companies to 74% from the present 49%. The plan is not public yet.

The source further revealed, the government wants to allow 100% foreign investment in railway operations, education, and rental housing management companies, the people said. FDI is currently prohibited in railway operations. Also, the government wants to increase the amount of FDI to as much as 6% of gross domestic product, the people said, compared with less than 2% now.

As of now, there are "no immediate comment" in context from ministry or reliable sources.

Prime Minister Narendra Modi has an ambitious target for India. He hopes by 2025, the economy will double in size to $5 trillion - making India the fourth-largest economy behind the US, China, and Japan. With government revenue under pressure amid an economic slowdown, authorities are banking on private investment to drive growth.

Relaxation of FDI restrictions in the aviation sector may help attract bidders for national carrier Air India, which the government is trying to sell after a failed attempt previously. The government also plans to dispose of Bharat Petroleum Corporation Limited (BPCL) — the country’s second-largest state refiner, and Shipping Corporation of India Ltd. (SCI) — the largest Indian shipping Company.

Last year, presenting the annual budget for 2019/20 in July, Finance Minister Nirmala Sitharaman had said the government would hold discussions with stakeholders to relax FDI rules in the aviation, media, animation and insurance sectors, and ease rules for single-brand retailers.

In the World bank’s ease of doing business report, India’s rank has improved to 63rd this year among 190 economies from 77th last year.

In the April-June period of the current fiscal, overseas investments increased by 28% to US$ 6.3 billion. In 2018-19, total FDI into the country stood at $62 billion, an increase from $60.1 billion in 2017-18.

India mainly attracts investments from countries like Mauritius, Singapore, Japan, the U.K., the Netherlands, the U.S., Germany, Cyprus, France, and the U.A.E.

This is a developing story: We'll give updates on the situation as we learn more.